ISSUE 357 | 07 JANUARY 2015

Contents thereport 05 Beyond music: The Interview 06 Pinboard: Stats, deals, startups and more 2015: what’s next? 08 Country profile: Ireland The trends that will define digital music over the next 12 months 2

ISSUE 357 07.01.15 COVER FEATURE

Beats finally makes global waves Apple’s proper move into streaming music didn’t come with the launch of iTunes Radio – or even with its $3bn acquisition of Beats. It’s the upcoming relaunch of Beats Music that will really show us Apple’s ambitions to dominate the transition from downloads to streams. Veteran Apple watchers will have been smiling at the strategic leaks in recent months of the company’s plans – from its desire to lower the price of a monthly streaming subscription to as little as $5 to its negotiations with artists for exclusive deals on big albums. Apple has the clout to trigger a streaming- music price war as well as a wallet-laden battle for exclusives – it comfortably has the biggest wallet, obviously – as well as the What’s next? device footprint to push a free trial of Beats to hundreds of millions of phones, tablets and Happy New Year and all that, but will 2015 be joyful for the music computers worldwide. Beats Music reportedly The trends industry? It’s shaping up as a crucial period for many reasons ended 2014 with 300k subscribers; place your bets now on what multiple of that it’ll have by that will – from identifying the long-term winners in the streaming market the end of 2015. to understanding which non-music companies will be genuinely define digital significant to the industry’s growth. Many of our predictions are Managers on the march necessarily, well, predictable: Apple relaunching Beats; managers music over Yes, there’ll be plenty of debate about what asserting themselves over royalties; Facebook giving YouTube some streaming’s growth and downloads’ decline the next proper competition in online video. But these trends and more are means for overall industry revenues in 2015.

report key to understanding why 2015 might be the most interesting year in But the debate that will come increasingly 12 months digital music since 2003 and the launch of the iTunes Store to the fore – even more so than in 2014 – is the argument about how those revenues are the 3

ISSUE 357 07.01.15 COVER FEATURE

SoundCloud looks much more swoopable than Spotify, especially if it manages to strike more deals to remove the threat of rightsholder lawsuits”

being divided. Managers will be crucial to the an IPO is not Spotify’s priority, it will surely Survival strategies Tidal make breakthroughs? Will genre- debate. come in 2015 unless someone swoops for pureplays focused streaming services – country or Those who spoke out last year about in with an offer the company truly can’t Whether funded by device sales, advertising metal, anyone? – find their niches? Can the need for transparency – Brian Message refuse. or venture capital, the big guns of the MixRadio take the Pandora model global in the UK, for example – have already A hugely enriching moment for streaming music world this year will hog as part of Japanese social giant Line? All signified their intentions to not just shareholders – labels included – but also most of the headlines. Amid the heat of the questions that will make 2015 extremely continue agitating publicly in 2015, but to potentially a hugely divisive moment amid Apple versus Google/YouTube versus Spotify interesting, although there are sure to be organise their peers and take that stance the artist royalties debate. battle, what chance for smaller pureplay high-profile casualties along the way. to the negotiating table with rightsholders SoundCloud? While an IPO isn’t out of the digital music services? Actually, there’s plenty and digital services. question, it looks much more swoopable than of room for optimism: the 900lb gorillas will The race to truly Watch closely, too, for the impact in the Spotify, especially if it manages to strike more require nimbleness from their underdog rivals. understand music fans US of Maverick, the company launched last deals (it currently only has Warner Music in Can Deezer crack the US through October as a supergroup of management the bag) to remove the threat of rightsholder hardware partnerships? Will high-definition Like the Beats relaunch, this is a trend firms led by Madonna and U2’s manager lawsuits. Take your pick for suitors from the services like Pono Music, Deezer Elite and presaged by a high-profile acquisition in Guy Oseary (in partnership with Live usual big-tech firms. 2014 – in this case, Spotify Nation), who is determined to take a lead in And Shazam? It should still be an buying The Echo Nest. Digital striking digital deals for its clients. acquisition target, sitting between television, music folk (us included) have advertising and music. But who will buy? And been pontificating about “music Sale or IPO for Spotify, if the answer is “nobody”, does the company discovery” for years now, but SoundCloud and Shazam have the business to go for an IPO? 2015 is the year it will finally – really – mean something. Post-Beats, what will be the next big exit Yes, there may be a for the digital music market? We suspect streaming price war. And yes, there’ll be two in 2015, and perhaps even distribution and marketing three: Spotify, SoundCloud and Shazam. In will be a huge factor in driving the first two cases, how those exits pan out takeup (in trials at least) of will tell us a great deal about the balance various services. But don’t

report between short-term profit and long-term underestimate something strategy in this space. bubbling away once people For all of Daniel Ek’s protestations that start using these services: their the 4

ISSUE 357 07.01.15 COVER FEATURE

Snapchat’s plans to add videos, mu- sic and news have already leaked out; plus it is starting the year with a $485m of new funding”

simply an ad-supported one. terms, smartwatches will remain a novelty Messaging apps as Meanwhile, watch closely to see if rather than a game-changer: just a fun new Irving Azoff follows through on his threats way to control playback on a smartphone. ‘the new social media’ to sue YouTube over songwriting royalties. More impact will come from other kinds We won’t claim the credit for that line: VC But just as interesting a trend for 2015 of connected devices: cars – more fruits exec Fred Wilson bagged it in his end-of-2014 ability to truly understand their listeners. is the fact that YouTube is finally going to from partnerships between automotive blog post. “Messaging is the new social There are two separate strands to this. get some serious competition in the online firms and streaming services – as well as media,” he wrote. “Families use WhatsApp First, how do the likes of Spotify use their video market. At scale, that will come from from connected hi-fis and other audio- groups instead of Facebook. Kids use mammoth data archives to retain their Facebook, which is already driving huge streaming devices designed for the living Snapchat instead of Instagram.” The growth long-term users in the face of growing numbers of video views on its platform – room. of messaging apps was an important and competition? If someone’s been listening to 1bn daily views by the end of 2014. Right We also expect big things from some hardly-unremarked-upon trend in 2014, and Spotify for two, three or more years, what at the end of 2014 came an individual new players in the familiar device it’s why music:)ally wrote so regularly features will keep them listening and how illustration: Apple’s holiday video ad was category of smartphones. Well, about these and other companies will their data drive that? The Echo Nest is watched 3m times on YouTube and 20m new to the West, anyway: in the space. about as good a team of people as we can times on Facebook. Chinese smartphone makers In 2015, their ambitions think of to answer that question. For 2015, that spells more music like Xiaomi and Huawei will to become media portals But the other strand is how digital services marketers uploading videos directly to be on a global expansion rather than just messaging hit the ground running with new users: Facebook and likely some more rumours drive – the former company conduits will be a big deal. grasping their tastes as quickly as possible about a fully-fledged Facebook music recently raised $1.1bn for Snapchat’s plans to add and using that to drive retention too. videos feature. But watch too for smaller exactly that – with content videos, music and news have players like Vessel, which is trying to create (music included) part of their already leaked out; plus it is Off-YouTube players make a new off-YouTube (and off-Vevo) premium picture. starting the year with a $485m video moves window for music videos. The failure of Samsung’s Music injection of new funding, some Hub remains a cautionary tale for of which will be used to further YouTube ended 2014 as (once New devices any device maker who thinks those plans. Line is buying again) the world’s biggest making an impact selling lots of handsets is a MixRadio and launching digital music service. That guaranteed base for digital a separate music service won’t change in 2015, although Numerous tech blogs are music success. Still, the in Japan, while the likes we’ll also see whether the hailing 2015 as the year of Chinese firms’ expansion of WeChat, Tango and

report initial trial of YouTube Music wearable devices, not least – into India as well – will be KakaoTalk (left) mull their Key turns into a sustainable because of the debut of the an important trend to watch media options. Messaging and paid streaming service, or Apple Watch. Yet in music in 2015. apps as the new social media? the 5 2015 does feel like a new frontier: the culmination of recent progress, from Patreon to Bandcamp, PledgeMusic ISSUE 357 to BitTorrent, BandPage to Kickstarter, not to mention the expansion of pretty much every digital distribution 07.01.15 COVER FEATURE firm’s remit to YouTube monetisation alongside sales and streams”

They’re also the new media – and what that tradition, but it’s more about a groundswell The second digital digital transition: from sales to streams – means for music will become much clearer of artists making meaningful (and still transition’s key year because it’s those early adopters, the in 2015. largely unmeasured by the traditional big spenders on downloads, who’ve industry) revenues. The first digital music transition – from switched first. DIY continues its To return to a familiar recent music:)ally physical to digital – never quite… 2015 is a key year for the steady growth theme, though, 2015 needs to be the year transitioned. Some major music markets mainstreaming of streaming (an awful that stronger links are forged between – hello, Japan and Germany – remain CD- phrase, admittedly) but that’s going to Suggesting that direct-to-consumer streaming services and D2C firms: from heavy, while others were less successful take some risky, long-term thinking from distribution is a trend of 2015 is a bit of a more ways to take streaming fans of an than expected in the pace at which digital services, rightsholders and artists reach: it’s a much more slow-burning trend artist to their D2C activities, to perhaps they took downloads beyond the early alike. If ever there was a time for labels that’s run throughout the history of digital even building crowdfunding into streaming adopters. and digital services to prove they’re not music. services. If YouTube can do it, why not This is why there are so many dry just hanging on for Big Exit payouts, it’s Even so, 2015 does feel like a new Spotify or Beats? mouths right now about the second this year. :) frontier: the culmination of recent progress, from Patreon to Bandcamp, PledgeMusic to BitTorrent, BandPage to Kickstarter, not to mention the 2015 needs to expansion of pretty much be the year that every digital distribution stronger links firm’s remit to YouTube are forged be- monetisation alongside sales and streams. tween streaming All of this will continue services and D2C in 2015: yes, there’ll be firms:... if You-

report some more high-profile Tube can do it, case studies in the Amanda Palmer/Thom Yorke why not Spotify the or Beats?” 6

ISSUE 357 07.01.15 BEYOND MUSIC There are echoes here with music in the 1980s and 1990s in the wake of the Parents’ Music Resource The Interview Centre putting advisory stickers on albums”

Nothing sells like something midnight queues to see it at the cinema took you’re not supposed to on a hugely patriotic bent – namely that see or hear... they were going to see it precisely because another country (possibly) said they shouldn’t uilding a “pre-presence” online for be allowed to see it. movies is nothing new. The release It was released online on Christmas Eve of Blair Witch Project in 1999 was in America and, by the first week of January, regarded as a bold vision (well, back had generated $31m in streaming revenues, Bthen) of the future, where clues and threads making it Sony’s biggest online release of a were planted online ahead of its release film to date. (It has been rented or purchased to give the film a sense of verisimilitude, 4.3m times in the US in that period.) The intentionally blurring the lines between fact inevitable DVD release will help boost its and fiction in order to get discussions to go fortunes further and the narrative around it “viral” before anyone really knew what viral has changed from being, according to early marketing was. reviews, a weak comedy that deserved to be The net result was that this soon became ignored to becoming the must-see film of a hackneyed approach to whipping up public both 2014 and 2015. interest and it followed that the audience Cynics have already suggested that this became increasingly cynical about being “windowing” (out of necessity rather than spoon-fed and manipulated in this way. strategy) is going to save a film that could Today, anything that breaks from the norm have died at the box office under normal is instantly proclaimed as contrived (on circumstances. There are echoes here with social media, anyway) and any pre-release music in the 1980s and 1990s in the wake of controversy is proclaimed to have been the Parents’ Music Resource Centre putting carefully stage-managed. a movie clip went online showing the leader said they were too scared to screen it, and advisory stickers on albums that meant no So the massive hoo-hah around the being blown up in a helicopter and all hell the US president got involved, imposing new one worth their salt in hip-hop or rock could release (or non-release, or, more correctly, broke loose after that. sanctions on North Korea and its envoys. dare put out an album that didn’t have such the partial release) of The Interview marks Sony Pictures found itself at the mercy The latest twist (this week), however, is that a sticker. the start of something new, something of cyber attacks by a group claiming to be an ex-employee with a grudge was behind Nothing sells like something you’re not very different. A quick synopsis: the film is Guardians Of The Peace where all manner of the hacks. No matter. The wider issue is about supposed to see or hear. The phenomenal a comedy about two American tabloid TV embarrassing things were leaked, including how the film eventually got released. The idea book sales in 1960/1961 of Lady Chatterley’s journalists who land an interview with the emails between executives speaking a little of no release was quickly sidelined in favour Lover attest to that. Let’s pray, however, North Korean leader and are quickly put too frankly about major stars. The hacks of a limited number of theatres showing it that a thousand storms are not whipped up

report under pressure by US government agents may or may not have been done (or have and it being put online to buy or rent. The US in a thousand teacups this year by rattled to assassinate him. The North Korean been commissioned) by the North Korean news media spun it as a freedom of speech marketing teams tasked with making a terrible government and media voiced their outrage, government. The film was pulled, theatres issue and vox pops with people standing in film, or a terrible album, a success. :) the 7

ISSUE 357 07.01.15 TOOLS Pinboard » Deals Tweets

MIXRADIO SNAPCHAT #2015 Japanese messaging Messaging app service Line has acquired Snapchat has raised @jherskowitz MixRadio after it was spun $485.6m in new 2015: the out from Nokia (following funding, bringing year I’ve been Microsoft’s purchasing its total funding to waiting 10 years of the Finnish company’s date to $648m and for…. the year devices and services arm). giving the company a streaming music finally valuation of $10bn. goes mass market.

@popjustice DEEZER/LYRICFIND GOOGLE Of course the Deezer has main lesson of partnered Frozen is this: with LyricFind if your sister’s to offer having a party, don’t try to its users upstage her by announcing synchronised In a similar vein, Google has started offering your engagement. lyrics as they stream music (or they can choose lyric transcriptions and will push them up related to have the complete lyrics displayed instead). search results. @seaninsound Big prediction for 2015: 7DIGITAL APPLE iTUNES Real time enragement 7digital has become the As part of a move to and hatertainment to first UK download service comply with EU retail get far worse before to adopt Meridian’s new regulations, Apple it gets better. #2015 is allowing iTunes high-resolution MQA #predictions2015 #hashtag format, which delivers customers to “return” high quality audio purchases within 14 days and receive a music without hogging Follow Music Ally report full refund. bandwidth. on Twitter... twitter.com/musically the 8

ISSUE 357 TOOLS » Stats 07.01.15 Pinboard US MUSIC SALES (units) UK MUSIC SALES (retail value, £ millions) NEW SERVICE VESSEL 172m 2013 164bn 1,047 1,030 2014 151m 106 175 116m 168 106m 106bn 142

Streams Singles Albums 773 713

What is it? Digital albums Physical albums Streams 2013 2014 YouTube has such a grip on online video that it would be a fool’s errand to try and topple it. Right? Maybe not. US BEST SELLERS OF 2014 UK MUSIC SALES 2014 Facebook will aggressively push towards native video (millions of units) 2013 this year and Twitter is planning something similar. 15.6 Now enter Vessel, steered by former Hulu executives BEST-SELLING ALBUM and with an estimated $75m in funding for its two- 1989 (Taylor Swift), 3.66m COPIES SINGLES 18.2 tiered offering (subscription and ad-supported) covering music along with comedy, gaming and other 57.2 short-form content. But its first big play was at the end of December following a deal with Warner Music

ALBUMS 61.4 Group and claims it would pay royalties that far eclipse PHYSICAL that of rivals. Warner, of course, has not licensed to BEST-SELLING SINGLE the Sony- and Universal-backed Vevo, suggesting Happy (Pharrell Williams), 6.4m COPIES 29.7 a splintered future for music videos online. Empty DIGITAL

ALBUMS 32.6

report vessels, according to the maxim, make the most noise. But Vessel will only make serious noise when it’s jam- Source: Nielsen SoundScan, January 2015 Source: BPI, January 2015 packed with a dizzying range of videos from all corners. the 9

ISSUE 357 07.01.15 MARKET PROFILE Ireland

13.8% to 2.14m units and 104.3% to 47k units, respectively. In talks with music:)ally, Mark IRELAND Crossingham (MD of Universal Music Ireland) highlighted that Black Friday proved to be a very successful catalyst for sales, growing the STATS traditionally busy Christmas period. f The positive news regarding the comeback Population 4.8m of physical product is the result of HMV’s return to Ireland under the ownership of Hilco

d Capital, with a number of new and re-opened GDP per capita US$41,300 stores alongside DVD/games rental chain h Xtra-vision (also owned by Hilco). On the digital side, however, album sales fell 18% to Internet users 3.8m 790k units. Likewise, singles fell 27.5% to just c over 4m units. Broadband households 1m In line with the global trends, downloads in Ireland are clearly on the way out as

j streaming takes over. Streaming revenues Mobile subscriptions 5.3m grew by 120% year-on-year in the first half of i Smartphone users 3.3m Ireland: recorded music digital sales (US$ millions, trade value, Sources: IFPI, CIA World Factbook historical exchange rates) Source: IFPI The Irish recording industry is finally experiencing a comeback,

driven by the return of HMV, very promising growth in streaming 20 revenues and a healthier economy

ccording to the IFPI, recorded music have yet published figures for 2014, music:) 15 sales in Ireland totalled $39.3m in ally understands that last year looked 2013 – down 6% from 2012. Despite significantly more optimistic for the domestic Downloads 10 growing 25.9% to $20.9m, digital industry. Local industry experts concur that 17.1 Subscriptions Asales failed to make up for the decline in the market saw a return to growth, fuelled 14.4 Ad-supported physical formats, which saw sales fall 27% to not only by streaming on the digital side, but 11.0 12.4 14.8 5 Mobile $18.4m. The market was thus predominantly also by a 4.2% increase in album sales to just 1.7 Other digital digital for the first time in 2013, with a 53/47 under 3m units. 1.8 1.8 1.5 report split over physical sales. Of particular interest is the fact that album 0 Although neither the international sales grew as a result of a 15% increase in 2009 2010 2011 2012 2013 organisation nor the local trade body IRMA physical product: CD and vinyl sales grew the 10

ISSUE 357 07.01.15 MARKET PROFILE Ireland continued...

TOTAL TOTAL TOTAL TOTAL TOTAL 73.8 58.9 52.4 41.8 39.3 5.60

4.06

Digital albums Physical 60.9 2.14 CDs 45.4 34.8 Digital 25.2 18.4 1.88 Singles 0.97 0.79 20.9 12.9 13.5 17.6 16.6 2013 2014 2009 2010 2011 2012 2013

Ireland recorded music sales Ireland: recorded music sales (US$ millions, trade value, historical exchange rates) Source: IFPI (millions of units) Data sourced by Music Ally 2014, seeing further acceleration in the term, I expect streaming in Ireland to be as the Dublin Web Summit, the country is subsequent months. It is widely agreed that where it currently is in the Netherlands.” increasingly seen as a tech hub in Europe (tax Spotify has been the key driver, following its Donnelly added (in this new scenario), “We controversies aside). In this context, we have launch in Ireland in November 2012, which are focusing our resources in a different way. seen local music startups such as FanFootage was strengthened a year later through a Very little of our marketing spend now goes and Soundwave emerge and, although it has bundling partnership with Vodafone; a very to TV and we are increasingly working with been somewhat quiet of late, it will be worth positive note, given the experience previously playlists. At the same time, radio is still very keeping an eye on this sector. seen in the country by local telco Eircom with important in Ireland. Listenership is enormous With regards to how things are looking its failed MusicHub service. We’ve been signing some – more so than in other EU territories.” ahead, the state of the Irish economy is still In talks with music:)ally, Annette Donnelly great new acts and several Echoing Donnelly’s views, Crossingham far from ideal. However, the Central Statistics (MD of Sony Music Entertainment Ireland) said that UMG has “a big focus on playlists”, Office recently revealed that GDP grew by have also been signed to stressed, “Streaming is currently growing adding that “a lot of advertising is now geared 4.9% in the first nine months of 2014, while faster in Ireland than it is in the UK.” Arguably UK labels. It’s a good time towards streaming services”. He also feels that GNP (which strips out multinational profit this is also due to the fact that Ireland is for Irish music.” Ireland is currently going through a very good flows) rose by 3.5%. catching up in the streaming game; but, period with regards to music talent. “We’ve Crossingham says that there is still in any case, the future is certainly looking been signing some great new acts and several a lot of room for streaming to grow but Mark Crossingham, much brighter for the Irish industry. “We’re have also been signed to UK labels,” he said. that, at the same time, some areas of the still waiting to see the impact of Christmas, Managing director, “It’s a good time for Irish music.” country still need improvements in digital

report which will fuel growth as a new wave of Universal Music Ireland Given the amount of technology infrastructure. Both he and Donnelly smartphones and tablets get to the hands of companies now based in Ireland, as well expect Ireland’s recorded music business to consumers,” added Donnelly. “In the mid- as the growing relevance of events such see a single-digit growth in 2015. :) the ISSUE 357 07.01.15

11 Music Ally is a music business information and strategy company. We focus on the change taking place in the Music Ally is an ISSUE 357 industry and provide information and insight into every aspect of the business, consumer research analysing 07.01.15 example of perceptive the changing behaviour and trends in the industry, consultancy services to companies ranging from blue journalism at its chip retailers and telecoms companies to start-ups; and training around methods to digitally market your best, with unrivalled artists and maximise the effectiveness of digital campaigns. We also work with a number of high profile music Andrew Fisher, events around the world, from Bogota to Berlin and Brighton, bringing the industry together to have a good CEO, Shazam coverage of the commonsense debate and get some consensus on how to move forward. Entertainment digital music sector”

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